Inspector general lambastes city meter lease

Chicago lost hundreds of millions in deal, he says

June 03, 2009|By Dan Mihalopoulos, Tribune reporter

City Hall's inspector general blasted Mayor Richard Daley's parking meter lease Tuesday, alleging the administration gave up the potential for hundreds of millions in additional cash when aldermen rapidly rubber-stamped the deal.

While Inspector General David Hoffman put an official seal on what critics have been saying for months, the scathing report comes amid public outrage. Anger over the parking meter meltdown has yet to subside in a rare case where a blunder is sticking to a mayor who has outrun many controversies during his two decades in office.

Though Hoffman declined to single out Daley for criticism, the report will resonate at City Hall, where the mayor's tight rein is legendary and aldermen almost always are expected to back his agenda with little scrutiny. The report takes the City Council to task for ratifying the deal by a 40-5 vote in December, just a day after Daley aides briefed aldermen on it.

"There was no meaningful public review of the decision," Hoffman wrote.

The city got about $1.15 billion upfront for jacking rates and turning over control of its paid street parking system to a private company that gets to keep all the meter money for 75 years. Hoffman's report calls the lease a "dubious financial deal," arguing the city could have raked in at least $2.13 billion if only it had kept the meters after raising rates -- minus the cost of collecting the money and maintaining the meters.

Top Daley aide Paul Volpe immediately fired back at what he called a "misguided and inaccurate" report.

"This was a good transaction that protected taxpayers both in the short and long term," said Volpe, who was the mayor's point man for the deal and received particularly strong criticism in the report.

Volpe said the parking meter money has helped the city avoid service cuts and steep tax hikes. The money from the parking meter deal in this year's budget is equal to the cost of retaining 2,000 police officers, or half the budget of the Streets and Sanitation Department, Volpe said.

He added that aldermen were kept informed as the administration sought the highest qualified bidder.

"We do not force things through City Council," said Volpe, who also appeared to suggest Hoffman was out of his depth in analyzing the deal. "I'm sure the inspector general or his team have never conducted a project like this."

Even as they were voting for the deal, aldermen complained they had little choice because Daley already had built $150 million from a parking meter lease into his budget before a winning bidder emerged. Now some council members say they made a mistake in voting for the deal and want the city to back out.

Though the report only makes a glancing reference, the transition to the private company led by New York-based Morgan Stanley was botched and led to confusion on the streets. Meters often broke down when too many quarters were stuffed into them to pay the higher rates. Last week, some 250 new credit card payment boxes the company installed malfunctioned across downtown Chicago.

But Volpe insisted Tuesday that the private operators are better suited to run the 36,000-space system than public officials.

As for whether the lease price was right, an analysis conducted for the Daley administration in April 2008 concluded that leasing the parking meters could fetch between $650 million and $1.2 billion. Though the winning bid came in at the high end of that range, Hoffman said the study failed to factor in revenue the city lost by relinquishing control.

Tuesday's finding echoed a report by DePaul University professor H. Woods Bowman, a former Cook County official. Bowman's analysis, which the Tribune reported in February, concluded the city could have raked in $1.54 billion by keeping the meters in public hands.

Hoffman also said the city should have considered alternatives to the 75-year deal, such as a shorter-term lease with more modest rate hikes. Rates immediately quadrupled at most meters around the city, with the cost to park at some downtown spots to rise to $6.50 an hour within four years.

Aldermen weary of public criticism are expected to approve a measure Wednesday that would give them at least 15 days to review future privatization deals. Hoffman said that would be too little, too late and suggested the council hire an outside analyst.

Asked at his news conference if the council is no more than a rubber stamp for the mayor, Hoffman replied, "A good and strong legislative branch in the city would be a good thing -- is a good thing."

Volpe was Daley's chief financial officer when the deal was put together and has since been promoted to chief of staff. He shot back that Hoffman's analysis was flawed because it did not take into account the risk of declining parking meter use over the life of the lease.

Before Hoffman's report was released Tuesday, Daley again had defended the deal. "If we didn't have this money, you had better believe we would be in the tank," the mayor said.

Daley appointed Hoffman in 2005 to head an office that is supposed to root out wrongdoing in city government. Hoffman has expanded the role to include issuing public reports on city government's performance.

In one report last year, investigators spied on city garbage crews, alleging that truck drivers and laborers loafed for about two hours of every eight-hour shift.